PRIMERICA LIFE INSURANCE STUDY
GUIDE QUESTIONS WITH 100%
CORRECT ANSWERS
The paid-up addition option uses the dividend
a. to accumulate additional savings for retirement
b. to purchase a smaller amount of the same type of insurance as the original policy
c. to purchase a one-year term insurance in the amount of the cash value
d. to reduce the next year's premium - Answer- b. to purchase a smaller amount of the
same type of insurance as the original policy-additional permanent policy
An insured purchases a policy in 2000 and dies and 2005. The insurance company
discovers at the time that the insured concealed information during the application
process. What can they do?
a. Sue for the right to not pay the death benefit
b. Pay the death benefit
c. Refuse to pay the death benefit because of the fraud
d. Pay a decreased death benefit - Answer- b. Pay the death benefit- the incontestability
clause prevents an insurer from denying a claim due to statements in an application
after the policy has been in force for 2 years, even on the basis of a material
misstatement of facts or concealment of a material fact.
An applicant is seeking an insurance policy. In the underwriting process, it was
determined that the applicant has some dangerous habits, a risky occupation, and poor
health. Which of the following is TRUE concerning the policy premium?
a. it will likely be higher because the applicant is a substandard risk
b. it will likely be the average premium issued to standard risks
c. the applicant's habits, occupation and health do not affect the premiums
d. it will likely be lower because the applicant is preferred risk - Answer- a. it will likely
be higher because the applicant is a substandard risk
Which is the primary source of information used for insurance underwriting?
a. applicant interview
b. medical records
c. private investigations
d. application - Answer- d. application
Two equal partners in a business worth $150,000 are using a Cross Purchase plan to
protect against the death of each other. Which of the following statements would be
correct?
,a. partner B buys a policy on partner A in the amount of $75,000 naming Partner A as
beneficiary.
b. partner A buys a policy on partner B in the amount of $150,000 naming Partner A as
beneficiary.
c. partner B buys a policy on partner A in the amount of $150,000 naming Partner A as
beneficiary.
d. partner A buys a policy on partner B in the amount of $75,000 naming Partner A as
beneficiary. - Answer- d. partner A buys a policy on partner B in the amount of $75,000
naming Partner A as beneficiary.
Stranger-oriented life insurance policies are in direct opposition to the principle of
a. law of large numbers
b. good faith
c. indemnity
d. insurable interest - Answer- d. insurable interest-STOLI purchaser doesn't know the
insured, or have any interest in the insured's longevity, so it violates the principle of
insurable interest
Which is generally true regarding insureds who have earned preferred status?
a. they keep a higher percentage of any interest earned on their policies
b. their premiums are lower
c. they can barrow higher amounts off of their policies
d. they can decide when to pay their monthly premiums - Answer- b. their premiums are
lower- the insured is in excellent physical condition and employs healthy lifestyles and
habits
All of the following statements concerning the use of life insurance as an Executive
Bonus are correct EXCEPT:
a. the employer pays a bonus to a selected employee to fund to policy
b. it is considered a non qualified employee benefit.
c. the policy is owned by the company
d. any type of insurance policy may be used. - Answer- c. the policy is owned by the
company.
An insured receives a monthly summary for his life insurance policy. He notices that the
cash value of the policy is significantly lower this month than it was last month. What
type of policy does the insured have?
a. variable
b. term
c. securities
d. stock - Answer- a. variable- life policies vary in value, as the name suggests, because
the value is based on the stocks that support the policy. If a policyholder wants a more
stable, reliable value, he/she should invest in a fixed policy.
When an employer offers to give an employee a wage increase in the amount of the
premium on a new life insurance policy, this is called
, a. aleatory contract
b. executive bonus
c. key person
d. a fraternal association - Answer- b. executive bonus
In terms of Social Security, what is the interval spanning between the day when the
youngest child of a family turns 16 and before the surviving spouse may receive
retirement benefits? - Answer- Blackout period- begins when the youngest child reaches
the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as
early as age 60. No benefits are paid during this time.
Life insurance may be used to pay state inheritance taxes and federal estate taxes so
that it is not necessary to sell off assets from the estate to pay these costs. This is
called
a. estate conservation
b. estate creation
c. survivor protection
d. survivorship insurnce - Answer- a. estate conservation- life insurance may be used to
pay state inheritance taxes and federal estate taxes so that it is not necessary to sell off
assets from the estate to pay these costs. This is called estate conservation.
Which of the following applicants could the insurer charge a higher rate and not be
charge with unfair discrimination?
a. an applicant that was born in another country
b. an applicant who is legally blind
c. an applicant who has been a victim of domestic abuse
d. an applicant that smokes cigarettes as opposed to one that does not - Answer- d. an
applicant that smokes cigarettes as opposed to one that does not
Partner A in a business buys a life insurance policy on Partner B to protect herself
against a financial loss if he should die. Two years after the partnership is dissolved
Partner B dies. Who will receive the death benefit? - Answer- Partner A
Which of the following is NOT a type of information that needs to be gathered in order to
determine the value of someone's life when using the needs approach?
a. mortgages
b. expenses
c. estimated longevity
d. outstanding debt - Answer- c. estimated longevity
An employee will be taxed on the cost of group life insurance paid by the employer if the
amount of coverage exceeds
a. $10,000
b. $15,000
c. $25,000
d. $50,000 - Answer- d. $50,000
GUIDE QUESTIONS WITH 100%
CORRECT ANSWERS
The paid-up addition option uses the dividend
a. to accumulate additional savings for retirement
b. to purchase a smaller amount of the same type of insurance as the original policy
c. to purchase a one-year term insurance in the amount of the cash value
d. to reduce the next year's premium - Answer- b. to purchase a smaller amount of the
same type of insurance as the original policy-additional permanent policy
An insured purchases a policy in 2000 and dies and 2005. The insurance company
discovers at the time that the insured concealed information during the application
process. What can they do?
a. Sue for the right to not pay the death benefit
b. Pay the death benefit
c. Refuse to pay the death benefit because of the fraud
d. Pay a decreased death benefit - Answer- b. Pay the death benefit- the incontestability
clause prevents an insurer from denying a claim due to statements in an application
after the policy has been in force for 2 years, even on the basis of a material
misstatement of facts or concealment of a material fact.
An applicant is seeking an insurance policy. In the underwriting process, it was
determined that the applicant has some dangerous habits, a risky occupation, and poor
health. Which of the following is TRUE concerning the policy premium?
a. it will likely be higher because the applicant is a substandard risk
b. it will likely be the average premium issued to standard risks
c. the applicant's habits, occupation and health do not affect the premiums
d. it will likely be lower because the applicant is preferred risk - Answer- a. it will likely
be higher because the applicant is a substandard risk
Which is the primary source of information used for insurance underwriting?
a. applicant interview
b. medical records
c. private investigations
d. application - Answer- d. application
Two equal partners in a business worth $150,000 are using a Cross Purchase plan to
protect against the death of each other. Which of the following statements would be
correct?
,a. partner B buys a policy on partner A in the amount of $75,000 naming Partner A as
beneficiary.
b. partner A buys a policy on partner B in the amount of $150,000 naming Partner A as
beneficiary.
c. partner B buys a policy on partner A in the amount of $150,000 naming Partner A as
beneficiary.
d. partner A buys a policy on partner B in the amount of $75,000 naming Partner A as
beneficiary. - Answer- d. partner A buys a policy on partner B in the amount of $75,000
naming Partner A as beneficiary.
Stranger-oriented life insurance policies are in direct opposition to the principle of
a. law of large numbers
b. good faith
c. indemnity
d. insurable interest - Answer- d. insurable interest-STOLI purchaser doesn't know the
insured, or have any interest in the insured's longevity, so it violates the principle of
insurable interest
Which is generally true regarding insureds who have earned preferred status?
a. they keep a higher percentage of any interest earned on their policies
b. their premiums are lower
c. they can barrow higher amounts off of their policies
d. they can decide when to pay their monthly premiums - Answer- b. their premiums are
lower- the insured is in excellent physical condition and employs healthy lifestyles and
habits
All of the following statements concerning the use of life insurance as an Executive
Bonus are correct EXCEPT:
a. the employer pays a bonus to a selected employee to fund to policy
b. it is considered a non qualified employee benefit.
c. the policy is owned by the company
d. any type of insurance policy may be used. - Answer- c. the policy is owned by the
company.
An insured receives a monthly summary for his life insurance policy. He notices that the
cash value of the policy is significantly lower this month than it was last month. What
type of policy does the insured have?
a. variable
b. term
c. securities
d. stock - Answer- a. variable- life policies vary in value, as the name suggests, because
the value is based on the stocks that support the policy. If a policyholder wants a more
stable, reliable value, he/she should invest in a fixed policy.
When an employer offers to give an employee a wage increase in the amount of the
premium on a new life insurance policy, this is called
, a. aleatory contract
b. executive bonus
c. key person
d. a fraternal association - Answer- b. executive bonus
In terms of Social Security, what is the interval spanning between the day when the
youngest child of a family turns 16 and before the surviving spouse may receive
retirement benefits? - Answer- Blackout period- begins when the youngest child reaches
the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as
early as age 60. No benefits are paid during this time.
Life insurance may be used to pay state inheritance taxes and federal estate taxes so
that it is not necessary to sell off assets from the estate to pay these costs. This is
called
a. estate conservation
b. estate creation
c. survivor protection
d. survivorship insurnce - Answer- a. estate conservation- life insurance may be used to
pay state inheritance taxes and federal estate taxes so that it is not necessary to sell off
assets from the estate to pay these costs. This is called estate conservation.
Which of the following applicants could the insurer charge a higher rate and not be
charge with unfair discrimination?
a. an applicant that was born in another country
b. an applicant who is legally blind
c. an applicant who has been a victim of domestic abuse
d. an applicant that smokes cigarettes as opposed to one that does not - Answer- d. an
applicant that smokes cigarettes as opposed to one that does not
Partner A in a business buys a life insurance policy on Partner B to protect herself
against a financial loss if he should die. Two years after the partnership is dissolved
Partner B dies. Who will receive the death benefit? - Answer- Partner A
Which of the following is NOT a type of information that needs to be gathered in order to
determine the value of someone's life when using the needs approach?
a. mortgages
b. expenses
c. estimated longevity
d. outstanding debt - Answer- c. estimated longevity
An employee will be taxed on the cost of group life insurance paid by the employer if the
amount of coverage exceeds
a. $10,000
b. $15,000
c. $25,000
d. $50,000 - Answer- d. $50,000
